UK recruitment agencies are performing significantly better than a year ago, reveals a study by Deloitte and APSCo. 83% of recruiters have seen their net fee income grow over the past 12 months, while at the same time the number of recruitment agencies facing a decline in income has dropped by 11%. The growth comes with challenges however, with retention and further profitability high on the agenda.

Advisory firm Deloitte recently released, in partnership with APSCo, the 'UK Recruitment Index 2015'. The study looks at a wide range of financial and performance metrics, and was conducted among 200 firms across a broad range of specialisations (industry/function). 56% of the participating agencies earn a net fee income of less than £2 million, 31% between £2 and £10 million, while 2% nets fees above £100 million.

Net fee incomeOne of the key findings from the survey is that the recruiting sector has shown a significant improvement in performance in 2015. Across firms, 83% saw increased net fee income over the past year, up from 69% in 2014. The number of firms seeing a decrease also almost halved, from 20% in 2014 to 11% in 2015.

Challenges aheadAgainst the backdrop of growth come several challenges, the study highlights. 62% of the recruitment firms say they are having difficulty growing their head count over the coming 12 months, while 31% have issues in the retention of talent. Achieving a strong management team too remains an issue cited by 29% of respondents. Translating growth in footprint into financials is another area which is of concern, with 44% of recruiters finding that maintaining and improving profitability remains a challenge, while 44% admit achieving financial growth will be not an easy task.

Staff churningBuilding on the challenges relating to headcount, Deloitte and APSCo looked deeper into churn rates among firms. The researchers find that the average churn rate of people leaving businesses before 12 months stands at 18%, while after 12 months the number stands at 11%. The highest churn rate is amongst businesses whose net fee from income sits above 100 million, with 36% leaving the business within the period of 1 year while 28% leaves after 12 months. Firms with lower net fee incomes face lower retention issues, with those leaving a firm with a net fee income of under £2 million standing at 15% before 12 months, and those leaving after 12 months at 9%.

Keeping people happyOne method used to increase employees happiness with their job is providing better benefits, say the researchers. 18% of recruitment agencies are using prizes to boost the competitiveness of their employee packages, 15% offer lunches and 15% offer trips. Flexible working conditions are offered by 12% of those surveyed, while a car is offered to 6% of recruiters.

Long term growthThe long term growth in the sector sees three major areas of focus, with different levels of importance given to each. Training remains by far the most important element to the recruitment field, with 70% of firms stating it as very important, while 27% say it is fairly important. Technology comes in second, with 85% saying it remains important to them with 35% saying it is very important. The third category of importance is expansion, with 71% of firms seeking to grow in size, while 27% see this as very important.